tv Bloomberg Markets Americas Bloomberg July 5, 2017 12:00pm-1:01pm EDT
vonnie: from bloomberg world headquarters in new york, here are the top stories we are following. investors await the release of minutes and look for clues when the central bank may reduce its balance sheet holdings. oil snaps his longest winning streak this year as russia says it opposes deeper production cuts. consolidation in the electronics payment space, u.s. based vivint worldpay.e a -- buy in politics, at the united nations security council, they will hold an emergency meeting after north korea tested this first intercontinental ballistic missile as president trump goes on his second overseas trip since taking office and is
scheduled to meet with russian president vladimir putin and other world leaders didn't that in the next hour. abigail doolittle is here with the latest trading action. >> very small moves in the dow and s&p and makes trading action from the dow and s&p 500, perhaps investors on hold in waking the results of the fed meeting. the tech heavy nasdaq up four tents of 1% and on pace for its best day since last wednesday after quite a bit of selling action. we look at what is happening sector wise for the s&p 500. function, tech is the clear winner, of 9/10 of 1% and more red than green. on bottom, energy down about 1.7%. what is helping tech from a performance standpoint, perhaps the most, looking at the chip sector and the philadelphia semiconductor index up nearly
1.5%. macron trading higher. nothing fundamentally new. we are seeing a bit of a rebound rally after last week's almost 5% pullback. when we look at a chart in the bloomberg, something happening technically, this is a one-year chart, stocks on fire from the lows to this high, up 70%. a huge move. recently, similar to the nasdaq. 50 day moving average in orange. if it can hold, perhaps you see these trade higher but otherwise, a drop-down to the moving average. in yellow, the sox on the cusp of correction territory and a move would be close to bear market or down nearly 20%. let's look at oil. .ook at these declines
down 3.7% on the day as russia it is said to oppose further production cuts. i just spoke to our bloomberg strategist on commodities and he says he does not know who the officials are from russia and it goes against everything they have been saying. let's see how this plays this out as u.s. inventory data tomorrow and perhaps investors taking a breather as the first down day in nine after somewhat of a rebound rally from the weakness. let's look at the energy losers as exxon mobil, conoco phillips, the biggest rack on the s&p 500 with chesapeake energy and range resources the higher. weakness for energy but strength for technology. vonnie: thank you. u.s. markets reopening after the holiday and a rebound in tech shares leaving equities higher . ur senior --
thank you for joining us. did you read much into the tech selloff or just a blip at the end of the first half? >> i think it is maybe a little bit of a shift in leadership as the tech has had a phenomenal run. nine rations i think just got stretched. investors are looking at other areas where there are signs of life. i do not read much into it other than the certain back-and-forth, and a group giving some of it back after a good run. vonnie: where did the chips fall? >> i think that ultimately the economy is going to move forward , we see most of the data looking good. given that, we expect to see pick up in things like the consumer area, it plays well and the health care area plays well, areas that have very good balance sheets and have a growth story.
if the momentum comes out of the tech trade, you will look for places to put money to work and sectors with very good cash balance sheets like consumer and health care make sense to redeploy some capital. vonnie: what about allocation domestically versus emerging markets? trepidation about emerging markets these days investing, but you have a more positive view. >> we look at emerging markets and consider the implications of the credit boom that has received us, particularly out of china, the bank of international settlements, their statistics show the vast majority of net private credit creation the last two years has come out of china. one of the most opaque economies on the planet. we are encouraged by the fact that emerging markets look cheap
on a valuation basis but a bit concerned about tail risks related to a buildup of credit. we are underweight emerging markets and we like what we see in places like japan and europe where we are getting more of a pickup in growth. we like the developed foreign markets a little bit better than emerging. vonnie: you say a little bit of a pickup of growth in japan and europe, how miniscule is this pick up? >> it is small but we do have a foreign component to the portfolio we manage. although we have been more dollar centric with a focus more here domestically the last few years, there is some money we have to allocate. it is a question -- do we go with developed questions that are going shines of improvements versus where we may have more tail risks. we are not sure we are out of the woods in terms of terrorist in emerging markets so the default would be places like japan and europe. vonnie: how close attention are
you paying to the geopolitical risks? in your model, there is room to factor it in. our risks like the north korea missile test and other geopolitical risks, qatar, saudi arabia, are that factoring in more heavily these days into your considerations? >> you have to see if those risks you back in the market and we have not seen that yet. there is a lot of risk appetite. and risk premiums have been compressed for many years so not a sense of concern in the markets. if that -- if the risks were to spread and we saw more protectionism, if we begin to see a problem with global trade that fed back into the economy and markets, we would have to make changes as a relates to that. despite the drama in the past couple of days, there has not been much of a change in terms of the markets interpretation of the event.
therefore, we have not made changes yet as a relates to the g 20 meeting or north korea. vonnie: is there a central bank that could destabilize your view? sure, because one of the big things -- themes has been the compression of risk premium around the world. if there were a misstep after years of compressed risk premiums, where the forward-looking returns on assets, stocks, bonds, became too small, and there was concern about a misstep either too high short-term interest rate or and unwind of the balance sheet, or some other misstep, markets could very easily go into a risk off mode which we have not seen for years. that would be another risk we would have to ponder as we move forward through the later part of this year. vonnie: anything that the fomc meeting minutes that could take people by surprise? >> they will be looking for the
question about the start of the unwind of the balance sheet, the timing will be critical. when those minutes come out, that will be important. the obvious next step for the united states. the fed is very important as a relates to how the global central banks will behave. vonnie: less than two hours away so we better let you get back to work. let's check in on the first word news with mark crumpton. >> it is a pointed response to the north korean announcement that it is testfired an intercontinental ballistic missile for the first time. u.s. and south korean forces conducted a joint ballistic missile drill earlier today. the south korean president ordered the grilled with president trump approving. the u.s. calls north korea's launch a new escalation on the threat to america and the united nations security council on the matter today. president trump spoke about the
dispute over qatar in a phone call with the egyptian president. egypt is part of a saudi led coalition that is isolated qatar , claiming the country is supporting terrorism. president trump told the egyptian president that both sides should negotiate constructively and follow through on commitments to curb extremism. the president is likely to receive a friendly welcome in poland despite lingering skepticism in europe over donald trumps commitment to nato and his passphrase of vladimir putin , and his recent decision to pull the u.s. out of a major climate agreement. president trump arrives in warsaw later today for a brief visit that includes a speech in a square near the center of the 1944 warsaw uprising against the not sees. -- nazis. jeremy corbyn and prime minister theresa may went head-to-head in parliament today over the continued cap on public sector pay. answera question and
session, jeremy corbyn challenge the prime and mr. over her austerity program. >> let me spell it out, this is the only country in which wages have not recovered since the global financial crisis. more people are using food banks. 4 million children living in poverty. >> prime minister may has been under pressure, some of it from her own party to end a 1% cap on public sector pay increases. she says recommendations would be considered but she stressed the need to "live within our means." global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. vonnie: thank you. faces up, president trump critical issues as he goes into important meetings with global leaders. we will set the stage for the g 20 meetings next. this is bloomberg. ♪
♪ vonnie: this is bloomberg markets, i am vonnie quinn been donald trump setting up on the second foreign trip of his presidency with north korea at the top of the agenda. the country's first enter got in this old ballistic missile international ballistic missile launch. agreed to develop our initiative based on russia's step-by-step plan for a settlement in korea. as well as ideas from china. at the same time, freezing the nuclear capabilities of north korea and the military exercises
by the united states and south korea. vonnie: the united nations security council will hold an emergency meeting later today. more on this, kevin cirilli joins us from washington. the latest from the pentagon, a spokesperson says this north korean missile was a version we have not seen. the estimated range was in excess of 5.5 thousand kilometers, almost 3.5 thousand miles. it puts chills in the atmosphere. who will take the baton and run with it? what kind of alliance can we expect from the g-20? >> this is the first major international test for this president as he embarks -- has towardsarsaw -- heads warsaw. this missile clearly designed to
send a signal to washington, the u.s., and south korea have any missile test of their own in response. ,e heard from vladimir putin saying he disagrees with the strategy and the u.s. embarking on this regardless. the u.s. is trying to put pressure on trade. president trump said before he boarded air force one to go to the international meetings that , betweenthe trade china and north korea group 40% in the first quarter, so much with china working for us but we had to give it a try. the top economic ties to north korea is china with more than 80% of north korean exports and imports coming from china. placed strategically tweet on china t. the calendar for the g-20. up until the missile test, expecting the communiqué to be
bland and not say too much. does there need to be some kind of statement about north korea in the communiqué? >> it appear so, when you look at global trade, climate policy, that will be discussed, bilateral trade agreements, and north korea. it was just a couple of months ago when xi jinping met with president trump at mar-a-lago in florida. a --orth korea also tested i'm sorry, another foreign-policy issue that came up. leaders stilll testing this new president. this will be very much a topic of discussion when they meet. president xi jinping met with angela merkel earlier to kickoff the meetings. a lot of geopolitical shifting taking place as we speak. , major one of the major
meetings this week, obviously between president trump and vladimir putin. there is some concern that vladimir putin may get the upper hand on president trump. how much does this one meeting matter when it comes to foreign-policy and international coalitions? >> a lot. this administration is under investigation by the fbi and a series of congressional investigations into its relationship with russia and vladimir putin. passed nearly unanimously a bill to increase russian sanctions and the house has yet to take up that bill. every inch of their interaction will be highly, highly, highly analyzed and most of them will talk about combating isis as an area they can work together. vonnie: it will be an interesting weekend. take you to our chief washington correspondent. time for the bloomberg business flash. netgear wants to expand beyond wireless routers and home care -- home cameras. their ceo tells us that if the
company sees a chance to go into the lifestyle area or expand the security line, it will do that. low says the u.k. market for security market could grow 30 percent to 45%. lawyers discuss the guilty be with prosecutors last month, he said his client responded, i am not waiting for something i did not do. he is a former pharmaceutical executive facing criminal charges for securities fraud. that is related bloomberg business flash been traditional retailers not the only businesses feeling the squeeze from amazon.com, payment processors are as well and we will look at a nine point -- a deal to acquire worldpay. this is bloomberg. ♪
vonnie: this is bloomberg markets, i vonnie quinn. a victim and the world of payment processing as vantiv has a great to buy british company for $9 billion --worldpay four $9 billion. >> payments processing, financial technology, the news today is london-based worldpay has agreed to buy purchase by ohio-based vantiv this market cap coming into the day was $12 billion and they will pay in cash and stock. before the was announced, a note was put out saying it was unlikely vantiv would be the buyer of worldpay because of the price, just too expensive. we are talking about payment processing companies, talking about companies like paypal and square, companies that handle online transactions on e-commerce website. a business would pay a world pay or vantiv as a third-party to
handle the digital transaction -- credit car companies and banks have been acquires of companies like worldpay and it was fun out of rbs. j.p. morgan chase has shown interest in buying worldpay. do not expect a bidding war as j.p. morgan says it will not make a rival bid for worldpay. if you look at the bloomberg terminal, worldpay spiking up on the news yesterday. that it was going to be for sale, jumping up 23%. coming down today on the news. jpmorgan not putting forth a rival bid. itself coming from vantiv, not as high as some investors thought it might be
. vonnie: it is a 20% premium cotton -- not terrible, it makes sense rather than jpmorgan with regulatory issues, there would be fewer of them. vantiv here is -- is here and worldpay is in britain. >> you can look at that in two ways, vantiv does not get many synergies out of this because they're looking at a company based in the u.k. the idea is that this is a bet on payments processing as an industry. chart, revenue a from payments processing is growing every year and expected to keep growing as mobile payments expecting to expand a double teaser rates through 2020. because it is a broad, you do not do -- you do not see too many synergies. in u.s. --
on the right-hand side, you can see even by region -- ebditda by reason coming from global commerce. there may be some overlap potentially you could see vantiv . vonnie: this may be about running the business overall and there's plenty of merchants to be had, in europe. what about paypal, could they be a better -- bidder? is downbt it, worldpay quite a bit in part because not only jpmorgan but the market assumes there will be no other bidder. your point is well taken, there are not a lot of players in scale in the u.s. let, if you are going to do anything, you need to go overseas. involved,in capital, they had bought it from rbs.
a nice exit. >> it is, which is part of the game, if you take it private, you have to have some willing acquirers and it is possible the number of willing acquirers keeps dwindling. if there is any exit strategy, it is to invest in payment processors in europe and hope one of the big guns will take you. vonnie: we will keep you honest. thank you for the great deals report. when will the fed start to unwind its $4.5 trillion balance sheet? we will tell you what to look forward to when the central bank releases the meeting of the june meeting? ♪ .
this fifth of july. i am vonnie quinn and this is bloomberg markets. straight to taylor riggs with a check on the markets. tyler bank we are not seeing a lot -- tyler: we are not seeing a lot of conviction. nots&p 500 up a little bit a lot of moves in either direction. look at the nasdaq on the 1.5%. into my terminal, the function and you will see the tech and nasa that is leading the way up -- nasdaq is leading the way in terms of green and red. speaking of tech, we spoke with louise on bloomberg surveillance saying tech has been underperforming but it is within the relative strength index so perhaps more than a speed bump in the road. some of the individual winners and they are focused on microsoft up by the most points
and not percent, so to speak. microsoft say it may announce layoffs as its weeks to put more into the cloud. bloomberg intelligence analysts saying the hybrid cloud is emerging as a bit opportunity is likely to be the major sales driver and that is pushing the stock higher. where there are winners, there has to be losers. auto support supplier, o'reilly automotive is one company we are looking at. they said they are facing a more challenging cells environment than they expected tracking down some of their peers. jpmorgan said autozone and advance auto parts are a buy and the selloff of over riley is oversold -- o'reilly is oversold. on a similar theme, a look at tesla, that stock is down. they have slowing second-quarter sales compared to the first
quarter and those were some the higher priced cars. we know they're expected to release model c, offering it at onut $35,000 to 30 customers july 28 perhaps hoping that will help boost sales into the third quarter. vonnie: taylor riggs, thank you for that. the federal reserve will release the minutes of is june of autumn fomcting in under -- meeting in under 30 minutes. with tips on what to look for in the minutes is bloomberg fed reporter, gina. suggesting tips for fomc minutes, what might we learn that is new? gina: probably the most important thing people are focused on is what we will learn about the balance sheet timing. it forkets have taken it
granted that it is september. if the fed gives any indication about what they're thinking of the final details, it is really going to catch people's attention. vonnie: why wouldn't they and of -- and whose interest would it be? >> that is in at select point. at the same time, what we have seen is the sad has been unveiling more quickly that d have beene saife unveiling more quickly. when we got it the initial plan for the balance sheet, it came in the minutes and it would not be totally unprecedented. vonnie: can you see them setting a date or within the next three months? how would they phrase it? jeanna: it is extremely unlikely they would that a date, we could see an indication of how they are posturing themselves.
another they markets is attentive to his sequencing. if with the details about starting the balance sheet means a break and hates right, people will be attentive. -- means a break and people will be attentive. vonnie: highly related to the federal reserve, almost related to ecb, the fed wants rates to get a little higher? jeanna: certainly. fed officials say market moves are not their job, primarily concerned with economic dado but probably good for them to see it is happening. vonnie: the market has been at odds with the federal reserve. we have seen the somebody's saying two-year maximum and that's what the market is positioned for. it has it is important been the case during the entire hiking cycle.
while the market has been more accurate than the fed, it is worth noting that we have seen a sea change in the fed and the posturing where last year the fed was expecting it and everything in the world to delay that. this year, they have been more planned and have already gone twice which is what they said they would do. vonnie: talk about the concerns by charles evans about asset price inflation. we even have the word minsky being used? it is an interesting phenomenon and it seems like a lot of officials have come out and talked about market conditions and we saw it from dudley and fisher and yellen. it is not clear whether it is concerted and a lot of people think it as an the minutes will be a good window into that if we see it discuss in the minute, it
is something to take note of. vonnie: inflation is the primary thing they will speak about or did speak about, might we glean any more tips about how much thinking this inflation is transitory? i am reading the note. there was talk about so many times the fed could put the word transitory about inflation and our minutes, but that is not true, that can put it in as much as they want. jeanna smialek: i think they will have to defend it. andad an interesting note he made the point that the fed is probably not going to change the dialogue at inflation with the minutes. what we might get a glimpse into is how much discord there is around inflation? we know they need to pay more attention to the slow down than they are. we know patrick harker in philadelphia and many people perceive as a hawk has said he might has to rethink if
inflation does not pick up. we will be up to crystallize what part of the committee is sharing that if you when we look at the minutes. and of course, the semiannual testimony to congress next week. it has come around. this congress, what can they be expected to say? jeanna smialek: i am sure that tebow semiannual -- i'm sure it is the typical semiannual probablywhere she will not answer the political questions. what we will see about janet yellen is what she thinks about inflation, probably more clear than in the past. loose thesea less days because it looks like she will not be at the helm beyond february. jeanna smialek: that is something else we could hear about during the meeting. she has been pretty quiet about
it and you can see why it is in her interest, but we will see. vonnie: jeanna smialek covers all things federal reserve as she is an expert. thank you. a check on first word news with mark crumpton. mark bank to more airlines said it they are named as exempt for the ban on the. emirates and turkish airlines americanatisfying security concerns. in march, the u.s. banned laptops from 10 airports because of fears that the devices could contain bonds. president trump is on his way to warsaw, the first stop on his trip to europe. veteran diplomats and analysts are concerned about friday's meeting between the president and russian president vladimir putin and they are worried it is a mismatch. the two meet in homework, germany at the g-20 some --
hamburg. germany at the g-20 summit. experts will be called into oversee the grenfell tower. british police say that were covered all visible remains from the london tower three weeks after the blaze tore through the building and killed at least 80. the final death toll may not be known for months. a new york city police officer was killed this morning after officials said a gunman walked up to patrol vehicle and shot through the window. the attack on the office was unprovoked. -- police say the attack on the officer was unprovoked. she was a 12 year veteran and the gunman shot and killed by other police at the scene. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries, i am this is bloomberg. mark crumpton. this is bloomberg. thank you.
microsoft is reorganizing sales and marketing operations to woo more customers in ai in the cloud. according to a person familiar, it means thousands of jobs cut in field sales. joins us. you broke the story, give us the the laborers at microsoft seattle bureau. >> sure. early monday morning while a lot of people were getting rid -- ready for the for the july holiday, microsoft sent out a held and complicated memo. the idea that sent out a complicated and technical memo. it is to have more people who are doing industry specific work , working with customers in the industry and able to provide customers with a better, more detailed experience in order to sell them a lot more of microsoft products, especially new areas like cloud, data
analysis. the memo, while very, very detailed, did not detail any impacts on jobs. we understand for people familiar, it will result and thousand of job cuts and it's not will. in the memo on monday. -- it is not ruled out in the memo on monday. vonnie: as we hear that technology does not take jobs away, in this case is teams like it does. or other jawsge are necessary to support this new system -- or other jobs are necessary to support this new system? but theyobs go away added other people. we do not have a good sense right now. they issue for microsoft on salesforce is one is they have not done a significant sales reorganization in many years. it is a salesforce set up to
sell windows and office and server software largely into companies to use on their own machines and data centers. microsoft is selling a lot more and use of the cloud and microsoft data centers where they run things for customers and that is a different kind of him in motion. some are much more technical and require that expertise. some are text specific a for a health care customer and a feeling right now is they need a different sort of salesforce and that means some jobs are going the way. it is possible there will be new jobs created but we do not have new this -- good visibility into that. vonnie: are we looking at the end of the salesforce in general? especially if it works for microsoft, it seems like something that could be a prototype. >> this has been in discussion for a while. you have companies that you do
not have any of the traditional salesforce and for companies like microsoft, like amazon, which sell to really large customers, they need the handholding to set up whether a cloud solution or something at the company's site, they are going to spend seven or eight figures or complicated that of software and services, they generally want a salesperson they can talk to. i do not think that is entirely going away. there is history, more of a inside cells.t of the people not going out to sell to customers but rather trying to sell from inside the office and microsoft mentioned inside sales and for some of their cloud sales they are doing. vonnie: give us a sense of the restructuring and how they are tailoring what they do in two different verticals or whatever they call them in order to
proceed? .> it is very complicated i wish i had a picture or a diagram, they are splitting commercial sales into large business and smaller business. they have six different industry -- industry verticals, financial services, government and health care. and for different solutions they want people to push which is a fancy way of saying a package of software. one is modern workplace, office 365 cloud software. there is infrastructure which is in the cloud will be there azure services which compete with amazon's web services. and a data service which is microsoft is trying to sell a lot more like azure, machine learning and cortana and cognitive services for those sorts of things. there somebody at
microsoft we could call and help us understand these changes. thank you for that wonderful story you broke. it is time for latest bloomberg/. deutsche bank is responding to brexit by moving large amounts of trading assets from london to frankfurt. according to people familiar, the strategy will probably be implemented over the next 18 months. the plan will be reviewed if the brexit planet changes. daimler and chinese partner are investing some of the $35 million in electric medical -- battery vehicles. it will be call aging bend. a daimler spokesperson said the company expects the chinese market to have a substantial share of electric vehicle sales by 2025. amazon will create 1500 full-time jobs with a new salt lake city center. the a 55 square foot space will
,llow workers to package books electronics and toys. this is amazon's first facility in utah. virgin branson's galactic is set to relaunch trips. \ she hopes to be on the first trip to spain -- he hopes to build the first chapter 2018. the company experimented with the rocket plane broke apart due to cope all it malfunction -- copilot malfunction that is your latest bloomberg/. tesla shares are tumbling as the models disappoint. will the model 3 be able to rev up energy in the company? this is bloomberg ♪ -- this is bloomberg. ♪
vonnie: this is "bloomberg markets." i am vonnie quinn. , ata shares are tumbling the lowest point in a month before the introduction of is a model three sedan. joining us is jamie. i cannot really keep track of this anymore. i was talking to you about the relation investors were feeling that tesla would beg to make 20,000 model threes by december. >> manufacturing is the big challenge at tesla and has been from the beginning. the idea, the design and all of that is pretty straightforward, but actually building them in large quantities is challenging. on monday, we got this positive news, they are on track to start making model threes this week
and make them in decent numbers by the end of the year. hear thatwe get to they did have some problems in the second quarter and cannot make enough of the big batteries they need for the existing cars of the x suv. a lot of concern and disappointment. we will see. megan friday, we got another update report and everything goes assuming up. it is such a volatile stock, so many loads, always in a battle. vonnie: we are getting some analysts' downgrade. cut a six month price target by $10 to $180, that is not even 5%. admittedly for regular stock might be a lot but for this does not seem like a huge downgrade. people believe it is still possible. jamie butters: it is really skepticism about
to the current valuation, it is lower than it has been trading at. elon musk has a lot of fans and the investor community, as well as among car buyers and people lower than it has been tradingwant green, pollution fre transportation. thingsdone an incredible getting the number of vehicles launched that they have launched in making what they have. it has been remarkable success. how far it can keep going is the big challenge? huge, ambitious targets ahead and not clear they can be met, but not he is clear they cannot. vonnie: let's switch to volvo. an interesting story about the swedish maker of trucks and vehicles is going to get out of the combustion engine business. isn't that with the volvo was set out? jamie butters: the truck business is separate from volvo cars. volvo ab is going to make
trucks. they are not really getting rid of the combustible engine instead of cars the only have an combustible engine. a lot will be hybrids and some will be mild hybrids that do not do as much as a pre-terms of driving an electric power. they are moving away from burning gasoline, consuming diesel and more clean and more electric powertrains. they are saying he is customer driven and that seems a bit curious and regulatory driven and a couple of key markets, china and europe. in the u.s. right now, the trump administration is reevaluating whether to water down some of the obama administration's ambitious fuel economy targets. that is not the way the rest of the world is going and volvo is a global company. it, a fewu said
columnists mentioned it about tesla is facing competition via volvo because tesla had a this niche and now volvo is getting into it. jamie butters: it will be interesting to see how it plays out. game has talked a good about wanting other carmakers to get into electric cars. on the other hand, know what it's cracked the code, the consumer demand the way tesla has. gm has had a good electric cars, not selling very well. lots of good hybrids out of detroit and only hybrid that has sold well is the prius. vonnie: jamie butters in a detroit. thank you. more markets ahead. ♪
it a gift to the rest on the fourth of july and said he aims to have a missile that can hit the u.s. and this year. holds ancurity council emergency meeting later today at president donald trump takes off on his second overseas trip since taking office. it is highly anticipated meeting with russian president vladimir putin. the federal reserve releases the minutes of its june meeting and we will take what to look for. ♪ david: g-20 leaders may have thought they would be focused on trade but their leader of north korea had different plans. to take is what the agenda looks like after the missile, kevin